Specialization
in the production of some good has driven many countries into the exportation
and importation of those goods. Importing and exporting products is often more
suitable action for this countries to do because they might produce more good
than necessary for their population that they have to export them and at the
same time they gain more profit, but also a lot of countries find more suitable
to import some products because they find it cheaper since those products will
require a high income for the final products and would be cheaper to import
them. It totally makes sense to import and export products, but a lot of
countries import and export the same product, if they are already producing a
certain product why would they export it and then import same product? The
products that are being imported and exported at the same time fall into two categories, homogeneous goods
which are goods that are identical, meaning that the consumer can't find a
difference and then we find differentiated products which are the same products
but with minor differences. A country will trade homogeneous and differentiated
products because of different reason that would make them the most suitable
option for some countries.
Why in
the world will a country import and export the very same product or trade
homogeneous goods? These countries will trade homogeneous good due to different
condition that could have an effect on the price of the product as location,
join products, entrepot trade and re-export trade. The transportation cost
affects the price of the products because depending of the distance it has to travel
will make the price vary. For example City 1 is in country A, City 2, and 3. If
City 2 is a lot closer to City 1 in country A than city 2 and 3, it would be
cheaper to ship goods from city 2 to 1 than to ship it to city 3 or 4 as shown
in the map below. Other factors as join products have an effect in the trade of
homogeneous products because some products might come with other services that would
be beneficial if they are exported rather than being kept within the country. For
example, country A might import a product (in this case the products involve in
the homogeneous trade) attached with another good that they need, and they
might export the same products (the homogeneous good) attached with other
goods. An entrepot trade has a big effect in the trade of homogeneous products,
since a firm might have the products be manufacture in country A and then export
to country B because they have a worldwide distribution center in the country
and then the same good produced in country A would be exported to other countries
around the globe by the headquarters in country B. Another factor that causes
the homogeneous trade is re-export trade which consists in the import of a good
and then some minor modifications are done to it and then they are exported to
another country.
There
are other good that look a lot alike but they have differences that the customer
can tell and quality. Differentiated good can vary on quality and some other
things that would affect the judgment of the customer, but we are not talking
about this today. Exportation and importation of good is good for several economies
system in countries because it lets them grow. For example, Japanese like
compact cars, they make the, but they get to a point where they can't sell and
many, so they start to export them to sell them in other countries and these
other countries import them because they don't produce them. Homogeneous trade
is affected by other factors, but it is still good for some economies because they
usually find the most profitable and often the most efficient way to get to
their consumers, so it wouldn't be a waste of money and resources to export
goods from city 2 city 1 instead of exporting them to city 3. I think that
businesses will usually find the most efficient way to distribute the good
simply because of the law of supply and demand which will limit what companies
can do.
